Why are mission statements critically important?

Having the right mission statement for your company is critical, because everything else follows.

Our mission tells us, our employees, customers, partners and investors what ongoing outcome we produce. It allows us to make decisions regarding products, services, organizational structure, marketing and channels to market. It lets us see the advantages of new innovations and to avoid being disrupted.

To do this our mission statement is NOT, “build the best products, delight customers and make shareholders money”. It is not focused on our products; they are the tools that enable our mission. Our mission statement needs to reflect the outcome we produce for our customers. This is further detailed in The Alignment Diagram. Mission Statements read like, “We cure cancer” or “We are putting a man on the moon”.

Some examples are;

“World's leading producers and providers of entertainment and information” – Disney Corporation, not, “We make movies and run theme parks”.

“To bring inspiration and innovation to every athlete* in the world”.– Nike, not “We make sporting goods”.  (*“if you have a body, you are an athlete”, Bill Bowerman, Track and Field Coach and Co-founder of Nike)

“Share Moments, Share Life” – Kodak, not “Photographic film”, oops!!!!

Kodak is an interesting example, their marketing literature said that what they were creating ways for customers to "Share moments, Share life". We heard phrases like, “that’s another Kodak moment”. Yet the actual mission statement reads as;

"At Kodak, we believe that by doing well by shareholders also means doing right by customers, employees, neighbors, and suppliers. With that in mind, Kodak operates its facilities, and designs and markets its products and services, not only to increase shareholder value, but also to promote development of the individual, the well being of the community, and respect for the environment."

Today we Share moments, Share life, using Facebook, Instagram, Twitter or YouTube. The technology that allows us to do this was invented by, Kodak. In 1975 a young Kodak engineer, Steven Sasson, invented the first digital camera. In 1991 Kodak patented the technology and made money licensing the technology to other organizations.

When Kodak was deciding whether to invest in digital camera technology or not the decision criteria wasn’t will this help our customers share moments, share life. Instead it was, how do we maximize the returns for our shareholders. The misunderstanding at Kodak was that you only achieve shareholder returns if you have customers wanting to spend money with you.

Let’s write an alternative history. In 1991 Kodak produce the first SLR digital camera called the Ecam (this part is true, from here on it is made up). They invest in the new technology and with the rise of the Internet seize the opportunity to develop new ways for their customers to share moments, share life. In 1999 they launch K-Gram, a way of sharing photos on line with a group of friends. Feedback from their customers say they want to share more than still photos, can Kodak enable the sharing of videos? In 2004 Kodak launch K-Tube. These two Internet based offerings are very successful but again customers are asking for more functionality. They want to connect with friends, share what they doing, add links to their photos and videos. In 2008 Kodak launches K-Book! Imagine their shareholder returns if they had of launched Instagram, YouTube and Facebook?

Nested Mission Statements

There is another dimension to the mission statement which is often overlooked. There needs to be a hierarchy of nested mission statements down through the organization into each department. This embeds the mission statement up and down the organization. The reason for this is to better connect each group’s role in delivering the overall mission statement. Taking the Disney Corporation for example, the people working in a Disney theme park; retail salespeople, cleaners, performers, ride operators. Asking them to make decisions based on being the “World's leading producers and providers of entertainment and information” isn’t really helpful. But if we say to them that we want our theme park to be the “Happiest place on earth” they can make decisions based on increasing their guest’s happiness. This rolls up to the overall mission statement of being the world’s leading producer in entertainment.

The other reason for having nested mission statements is to provide directional alignment for the up and coming “driver” manager. This is the phase where the person on the management track wants to prove themselves by delivering results. Again using Disney, if the mission statement was focused on maximizing shareholder returns we find that; the manager decides to save costs by reducing the cleaning staff, implementing an incentive program to sell more of the latest movie merchandise and making sure the staff push hard on guests to buy the ride photos. But if happiness is the successful outcome they listen to the guests about what they like or feel could be improved, they implement better ride queuing technology, ensure the park is always clean and that staff are attentive. If the customer is achieving their outcome, happiness, they are likely to spend more money and return more often which ultimately delivers shareholder returns.

Jim Collins in his book, Good to Great, provides an example of this with Walgreens. Walgreens measures the amount of profit per customer store visit. To maximize this Walgreens work on having the right products, at the right time, on the shelves, making sure they are easy to find, having helpful staff and especially “great” store location, as Collins points out;

“If a great corner location would open up just half a block away from a profitable Walgreens store in a good location, the company would close the good store (even at a cost of $1 million to get out of the lease) to open a great new store on the corner”. (Page 92, Good to Great, Collins)

Mission statements need to be written to reflect the customer outcome that the organization is delivering. There needs to be a hierarchy of nested mission statements to embed the overall mission within the organization and to continually align decision making of staff and management towards the customer outcome.

What is your organizations mission statement? It is aligned to your customers’ outcomes or to your products and shareholders? Is it embedded in your organization?

More information on nested mission statements aligned to the layers of an organization can be found in Vertical Leverage